Module II

Planning and Decision Making

Planning

Introduction

Planning is the fundamental management function, which involves deciding beforehand, what
is to be done, when is it to be done, how it is to be done and who is going to do it. It is
an intellectual process which lays down an organisation’s objectives and develops various
courses of action, by which the organisation can achieve those objectives. It chalks out
exactly, how to attain a specific goal.

In the words of Koontz and O’Donnell, “planning is deciding in advance what to do, how to
do it, when to do it, and who is to do it. Planning bridges the gap from where we are to
here we want to go.”

Peter Drucker defined as “planning is the continuous process of making present

entrepreneurial decisions systematically and with best possible knowledge their futurity,
organizing systematically the efforts needed to carry out these decisions and measuring the
results of these decisions against the expectation through organised systematic feedback.”

According to Theo Haimann, “planning is the function that determines in advance what
should be done. It consists of selecting the enterprise objectives polices, programmes,
procedures and other means of achieving these objectives.”

Steps of Planning

The planning function of management is one of the most crucial ones. It involves setting the
goals of the company and then managing the resources to achieve such goals.

1. Identification of Opportunities: An important part of the planning process is to be

aware of the business opportunities in the firm’s external environment as well as
within the firm. Once such opportunities get recognized the managers can identify
the actions that need to be taken to realize them. A realistic look must be taken at the
prospect of these new opportunities and SWOT analysis should be done.
For instance, the government plans on promoting cottage industries in semi-urban
areas. A firm can look to explore this opportunity.
2. Setting of Objectives: This is the second and perhaps the most important step of the
planning process. Here manager establish the objectives for the
whole organization and also individual departments. Organizational objectives
provide a general direction; objectives of departments will be more planned and
detailed.
Objectives can be long term and short term as well. They indicate the end result the
company wishes to achieve. So objectives will percolate down from the managers
and will also guide and push the employees in the correct direction.
3. Developing Premises: Planning is always done keeping the future in mind; however,
the future is always uncertain. So in the function of management certain assumptions
will have to be made. These assumptions are the premises. Such assumptions are
made in the form of forecasts, existing plans, past policies, etc.
These planning premises are also of two types i.e., internal and external. External
assumptions deal with factors such as political environment, social environment,
the advancement of technology, competition, government policies, etc. Internal
assumptions deal with policies, availability of resources, quality of management, etc.
These assumptions being made should be uniform across the organization. All
managers should be aware of these premises and should agree with them.
4. Identifying Alternatives: The fourth step of the planning process is to identify the
alternatives available to the managers. There is no one way to achieve the objectives
of the firm; there is a multitude of choices. All of these alternative courses should be
identified. There must be options available to the manager.
Maybe he chooses an innovative alternative hoping for more efficient results. If he
does not want to experiment, he will stick to the more routine course of action. The
problem with this step is not finding the alternatives but narrowing them down to a
reasonable number of choices so all of them can be thoroughly evaluated.
5. Examining Alternate Course of Action: The next step of the planning process is to
evaluate and closely examine each of the alternative plans. Every option will go
through an examination where all their pros and cons will be weighed. The
alternative plans need to be evaluated in light of the organizational objectives.
For example, if it is a financial plan. Then it that case its risk-return evaluation will
be done. Detailed calculation and analysis are done to ensure that the plan is capable
of achieving the objectives in the best and most efficient manner possible.
6. Selecting the Alternative: The best and most feasible plan will be chosen to be
implemented. The ideal plan is the most profitable one with the least number of
negative consequences and is also adaptable to dynamic situations.
The choice is obviously based on scientific analysis and mathematical equations. But
a manager’s intuition and experience should also play a big part in this decision.
Sometimes a few different aspects of different plans are combined to come up with
the one ideal plan.
7. Formulating Supporting Plan: Once manager has chosen the plan to be
implemented, he will have to come up with one or more supporting plans. These
secondary plans help with the implementation of the main plan. For example, plans to
hire more people, train personnel, expand the office etc. are supporting plans for the
main plan of launching a new product. So, all these secondary plans are in fact part of
the main plan.
8. Implementation of the Plan: The last step of the planning process is the
implementation of the plan. This is when all the other functions of management come
into play and the plan is put into action to achieve the objectives of the organization.
The tools required for such implementation involve the types of plans, procedures,
policies, budgets, rules, standards etc.
Importance of Planning

Planning helps an organisation in the following ways:

1. Provides Direction: Planning provides direction and a sense of purpose for the
organisation. Without plans and goals, organisations merely react to daily occurrences
without considering what will happen in the long-run. Plans avoid this drift situation
and ensure that short-range efforts will support and harmonize with future goals. It
helps an organisation decide what to do and when to do it. It reduces aimless activity
and makes action more meaningful.
2. Unifying Framework: A plan helps people to set priorities and put effort
accordingly. A plan tells everyone what the organisation hopes to achieve and what
the contribution of each department must be, and who is to utilize resources to
achieve the goals. Plans help in coordinating effort at various levels. In the absence of
a plan, the organisation would be pulled in different directions, creating confusion and
misunderstanding at various levels.
3. Economical: Effective plans coordinate organisational work and eliminate
unproductive effort. Guess work is banished. Facilities are employed to the best
advantage. Waste motions and idle facilities are removed by focusing attention on
what is to be done, how and when it is to be done, plans help an organisation to
economically utilize the physical and financial resources. This, ultimately, improves
efficiency of operations.
4. Reduces Uncertainty: Planning helps an organisation to cope with an uncertain
future. It helps management to anticipate the future and prepare for the risks by
making necessary provisions to meet the unexpected turn of events. Planning
minimizes the chances of mistakes and unpleasant surprises because objectives,
policies and strategies are formulated after a careful scrutiny of internal as well as
external environment. Planning, thus, seeks to minimize risk while taking advantage
of opportunities.
5. Decision Making: Decision-making involves searching of various alternative courses
of action, evaluating them and selecting the best one. Planned targets serve as the
criteria for the evaluation of different alternatives so that the best one may be chosen.
If there are no plans for the future, there are few guidelines for making current
decisions.
For example, decisions have to be made in present for a product to be introduced three
years in the future. When future plans exist, decisions consistent with the future plans
are made. Further, without plans, people will make decisions according to their own
preference rather than those of the organisation.
6. Encourages Innovation and Creativity: Planning involves looking ahead and
preparing for the future. The process of looking ahead, forces an organisation to be
alert of opportunities and threats in the environment. It forces managers to find out
new and improved ways of doing things in order to remain competitive and avoid the
threats in the environment. It compels the managers to be creative and innovative all
the time. Planning helps managers to visualize problems early and take suitable
 remedial steps. It helps them exploit opportunities and come out as ‘winners’ in a
competitive world.
7. Improves Morale: Once members know what is expected of them, they can
contribute better. When goals are properly defined, work assignments can be fixed
and everyone can begin to contribute to the achievement of these goals. This produces
improvements in morale. Further, planning permits employees to participate in the
thinking process. This helps them develop a broad mentality. Also, when the plan is
actually translated into action, they feel that it is their own plan. Positive attributes
are, thus, developed.
8. Facilities Control: Planning and controlling functions are said to be ‘Siamese twins’
(inseparable twins). There is nothing to control without planning and without proper
control, planning proves to be a wasteful and an unproductive exercise. Plans serve as
yardsticks for measuring performance. They help in channelizing behaviour in the
right direction. They help in preventing mistakes, oversights and deviations.
9. Achievement of Objectives: Planning function begins with the setting up of the
objectives, policies, procedures, methods and rules, etc. which are made in planning
to achieve these objectives only. When employees follow the plan, they are leading
towards the achievement of objectives. Through planning, efforts of all the employees
are directed towards the achievement of organisational goals and objectives.

Limitations of Planning

The limitations of planning can be examined under the following headings:

1. Rigidity: Plans put the activities of an enterprise in a rigid framework. Everything is

spelt out in detail and deviations are not permitted. New opportunities are often
ignored or rejected because of the commitment to existing plans. Events may change,
but plans may remain fixed. Managers, too, would be reluctant to reorient their plans
suitably, because it involves serious mental work to put everything in black and white
change the same all over again.
2. Costly and Time Consuming: Planning is costly. It is expensive in terms of time
spent to formulate the plans, the manpower required to do the planning and resources
needed to execute the plan. The collection of information, evaluation of alternatives,
selection of a suitable course of action, etc., may consume lot of executive time and
organisational resources.
3. Employee Resistance: For any plan to succeed, business need operating people to
understand it, embrace it, and make it happen. One of the frequent complaints made
against the planning process is that it is done by specialists who are not in touch with
operations. As a result, operating people who are not involved in planning tend to
resist the planning process. Planning ‘imposed from above’ often leads to resentment
and resistance from those forced to execute.
4. False Sense of Security: Elaborate planning may create a false sense of security in
the organisation. Managers may begin to feel that everything is well taken care of.
They begin to assume that as long as plans are adhered to, there will not be any
 problems. As a result, they fail to take note of environmental changes and the need to
review, restructure and reorient the old plans in an appropriate way.
5. Managerial Deficiencies: Planning is an intellectually demanding function. Since
managers are assessed on the basis of results, they begin to discount long-range plans,
and adopt short-range plans which would put them in a comfortable position. This
may harm organisational interests in the long-run. Planning involves lot of paper work
and hard mental labour. Most managers may not like to undergo such a painful
process which, ultimately may not produce results.
6. Prevents Innovation: Planning demands commitment to written policies, procedures
and rules etc. It restricts a manager unnecessarily to defined areas. The executive is
prevented from experimenting with novel ideas, venturing into risky but profitable
areas and exploring the untested yet lucrative grounds.
7. Difficult to Predict: It is difficult for planners to forecast economic conditions,
government policies, competitive manoeuvres or human behaviour with any degree of
accuracy. Planning, basically depends on a whole set of assumed conditions. Only
when these assumptions are substantially correct, planning produces fruitful results.
Moreover, the reliability of planning efforts is open to doubt since they are projected
farther into the future, where the manager has no control over environmental forces.
8. Environmental Turbulence: Future is a moving target. It may not be possible to
anticipate future changes accurately and provide for them in plans. Uncertainty and
unpredictability, the hallmarks of business environment–reduce the usefulness of
planning and forecasting. Competition turns the best laid human plans into waste
paper. Economic, political and technological revolutions force corporate planners to
revise the plans day in and day out. Sometimes, there is a revision in plans even
before their implementation. In the face of a highly volatile and turbulent
environment, plans become obsolete documents and fail to guide the destinies of the
organisation. And, it is extremely difficult for the organisations to buffer themselves
against environmental instability, no matter how carefully and effectively the
planning exercises are done.
9. Emergency Situations: The utility of planning is further discounted, in the face of
emergencies like strikes, lockouts, industrial disasters like the one that took place in
Chemical Plant in Bhopal, Madhya Pradesh (India). In such instances, plans are
completely upset, decisions made hand-to-mouth.

Why Plans Fail?

 Complex plan and no one really understood the same

 Support from every one at every level missing
 Complicated procedures and methods coming in the way
 Internal issues not put to rest completely.
 Not a balanced and harmonious effort taking care of every aspect
 Very rigid, inflexible approach to every issue
 Effort not coordinated properly at various levels
 People who are charged with implementation not fully involved
  Impact of external forces not properly assessed
 Over estimating strengths and underestimating rivals’ capacity to hit back

Components of Planning

1. Mission: This is one of the first components of planning. The mission of an

organization basically dictates its fundamental purposes. It describes what exactly it
wants to achieve. The mission may be either written or implicit from the
organization’s functioning. A mission statement describes who the products and
customers of a business are. It shows the direction in which the business intends to
move and what it aims to achieve.
2. Objectives: Objectives represent the end results which an organization aims to reach.
Not just planning but all factions of business management begin with the setting of
objectives. Managers of a business should lay down their objectives clearly and
precisely. They must consider their mission and values before setting their goals.
Furthermore, they must ensure that their objects for each activity are in consonance
with each other.
3. Policies: Policies are basically statements of understanding or course of action. They
guide the decision-making process for all activities of the organization. Consequently,
they impose limits on the scope of decisions. Just like the mission statement, even
policies of an organization may be expressly written or implied. Managers make
policies for all activities of a business, including sales, production, human resource,
etc.
Policies should never be too rigid because that excessively limits functioning. Policy-
makers must also ensure they explain policies to employees clearly. This will prevent
any ambiguities that may arise. Policies must also change with time to suit new
challenges and circumstances.
4. Procedures: Procedures are some of the most important components of planning.
They describe the exact manner in which something has to be done. They basically
guide actions for activities that managers and employees perform. Procedures also
include step-by-step methods. Even rules regulating actions come within the ambit of
procedures. The planning process must ensure that procedures are always practical.
They should not be rigid and difficult to implement.
5. Budget: Budgets are plans that express expected results in numerical terms.
Whenever an organization expects to do something, it can make a budget to decide on
its target. Most activities, targets, and decisions require budgeting. For example, an
income budget shows expected financial results and profits.
6. Programme: A programme is nothing but the outline of a broad objective. It contains
a series of methods, procedures, and policies that the organization needs to
implement. In other words, it includes many other components of planning. For
example, a business may have a diversification programme. Consequently, it will
make budgets and policies accordingly for this purpose. Planners and managers can
implement programmes like these at various levels.
 7. Strategies: A strategy in simple words refers to minute plans of action that aim to
achieve specific requirements. Proper implementation of strategies leads to the
achievement of the requisite goals. The nature of an organization’s values and
missions will determine how it will strategize.
8. Rule: A rule is an explicit statement that tells an employee what he or she can
and cannot do. Rules are “do” and “don't” statements put into place to promote the
safety of employees and the uniform treatment and behavior of employees. For
example, rules about tardiness and absenteeism permit supervisors to make discipline
decisions rapidly and with a high degree of fairness.
9. Methods: A Method' is a prescribed process in which a particular operation of a task
is to be performed. It specifies the ‘one best way' of performing each step in a task. It
defines the technology of individual operations in a work situation. As compared to
procedure, ‘Method' describes how one particular step of a procedure is to be
performed. Method involved only one department and one person, while a procedure
may involve many departments and many persons in an organisation. A method is
meant to be a complete guidance to individuals in their performance of tasks.
10. Standards: A ‘Standard' is a norm or criteria against which performance is compared
and evaluated. In short, a ‘Standard' is a guide for performance evaluation.
A company may set up a variety of standards expressing the anticipated results of the
plans. Qualitative and quantitative standards are established in each area of business,
e.g., physical standards, quality standards, personnel standards, performance
standards, standards of service and conduct, etc. Financial ratios (such as liquidity
ratios, current ratio etc.) are very popular in financial management as standards of
‘economic performance.

Premises of Planning

1. Principle of Commitment: This means that certain resources must be committed or

pledged for the purpose of planning. Planning is not an easy task. So, necessary help
is to be taken from experts. The enterprise must be ready to exhaust the available
resources for the achievement of a plan.
2. Principle of the Limiting Factor: A plan involves varied factors of different
importance. This principle implies that more emphasis has to be put on that factor
which is scarce or limited in supply or extremely costly. This will help in selecting
the most favorable alternative.
3. Principle of Reflective Thinking: Planning, being an intellectual activity is based on
rational considerations. These involve reflective thinking which signifies problem
solving thought process, a process by which past experiences are superimposed on
the facts of the present situation and possible future trends.
4. Principle of Flexibility: Though a plan is prepared after reflective thinking, this does
not mean that no departure can be made in the course of its operation. The plan
should be so prepared that there is sufficient scope for changing it from time to time.
Changes must necessarily be affected in the plan for taking into account new
developments that may take place in the course of the operation of the plan.
5. Principle of Contribution to Enterprise Objectives: A major plan is prepared and
it is supported by many derivative plans. But all plans must contribute in a positive
way towards the achievement of the enterprise objectives.
6. Principle of Efficiency: A plan should be made efficient to attain the objectives of
the enterprise at the minimum cost and least effort. It must also achieve better results
with the minimum of unexpected happenings. Therefore, it is to be seen that what is
expected is likely to be achieved.
7. Principle of Selection of Alternatives: Planning is basically a problem of choosing.
The essence of planning is the choice among alternative courses of action. There is
no need for planning if there is only one way for doing something. In choosing from
alternatives, the best alternative will be that which contributes most efficiently and
effectively to the accomplishment of a desired goal.
8. Principle of Planning Premises: A plan is prepared against some foundations or
backgrounds known as ‘Planning Premises’. There must be complete agreement
among the managers in respect of planning premises over which the structure of plan
is to be framed.
9. Principle of Timing and Sequence of Operations: Timing and sequence of
operations determine the starting and finishing time for each piece of work according
to some definite schedule and give practical and concrete shape and form to work
performance.
10. Principle of Securing Participation: To secure participation of the employees with
whole-hearted co-operation in execution of the plan, it is necessary that the plan must
be communicated and explained to them for their full understanding. This
understanding provides the basis for additional knowledge about new facts and
matters to the employees. This is needed for improvement in the quality of planning.
It also ensures an obligation of the personnel of the enterprise to execute the plan by
individual and joint participation.
11. Principle of Pervasiveness: Though major planning function is entrusted to the top
management; it is not restricted to the top level only. It is a function of every
manager at every level in the organisation.
12. Principle of Strategic Planning: Strategic planning is essential where there is
competition. It is prepared in the light of what the competitors are intending to do.
Planners must take into account the strategies of the rival organisations, otherwise the
planning projection may land them in trouble.
13. Principle of Innovation: A good system of planning should be responsive to the
opportunities for innovation. Innovation consists in creating something new for
increasing satisfaction of the consumers. This may also be stated as an important
strategy of business. Innovation is a necessity for its sustaining growth in this
dynamic world. Innovation is achieved through research and development and
planning is required to provide such scope.
14. Principle of Follow-up: In the course of execution of a plan, certain obstacles may
crop up in midway and planning may require revision, alteration or correction. This is
why there must be a follow-up system in the planning process itself. This allows
timely changes in the planning and makes it more effective.
To be useful, planning should try to incorporate some of the time-tested and interrelated
principles, beautifully summed up by Koontz thus:

1. Principle of Contribution: Every plan should help in the achievement of

organisational objectives.
2. Principle of Primacy: Planning precedes all other managerial functions. It is the first
and the foremost function to be followed in the process of management.
3. Principle of Pervasiveness: Planning is an all-pervasive function. It is important to
all managers regardless of their level in the organisation.
4. Principle of Flexibility: By flexibility of a plan is meant its ability to switch gears,
change direction to adapt to changing situations without unnecessary cost (ability to
vary product mix, shift marketing effort geographically, raise additional funds on
favourable terms, reshuffle and relocate personnel quickly, change organisation
structure etc.).
5. Principle of Periodicity: Plans should be integrated and interconnected in such a way
as to achieve the stated objectives economically and efficiently. A manager should
review events and expectations regularly; refine and redraw the plan and keep it on
track.
6. Principle of planning premises: Every plan is based on carefully considered
assumptions, known as planning premises.

Coordination

Introduction

Co-ordination is the unification, integration, synchronization of the efforts of group members

so as to provide unity of action in the pursuit of common goals. It is a hidden force which
binds all the other functions of management.

According to Mooney and Reelay, “Co-ordination is orderly arrangement of group efforts

to provide unity of action in the pursuit of common goals”.

According to Charles Worth, “Co-ordination is the integration of several parts into an

orderly role to achieve the purpose of understanding”.

Importance of Coordination

1. Encourages Team Spirit: There exists many conflicts and rivalries between
individuals, departments, between a line and staff, etc. Similarly, conflicts are also
between individual objectives and organizational objectives. Coordination arranges
the work and the objectives in such a way that there are minimum conflicts and
rivalries. It encourages the employees to work as a team and achieve the common
objectives of the organization. This increases the team spirit of the employees.
2. Gives Proper Direction: There are many departments in the organization. Each
department performs different activities. Coordination integrates (bring together)
these activities for achieving the common goals or objectives of the organization.
Thus, coordination gives proper direction to all the departments of the organization.
 3. Facilitates Motivation: Coordination gives complete freedom to the employees. It
encourages the employees to show initiative. It also gives them many financial and
non-financial incentives. Therefore, the employees get job satisfaction, and they are
motivated to perform better.
4. Optimum Utilization of Resources: Coordination helps to bring together the human
and material resources of the organization. It helps to make optimum utilization of
resources. These resources are used to achieve the objectives of the organization.
Coordination also minimizes the wastage of resources in the organization.
5. Achievement of Objectives: Coordination helps to minimize the conflicts, rivalries,
wastages, delays and other organizational problems. It ensures smooth working of the
organization. Therefore, with the help of coordination an organization can achieve its
objectives easily and quickly.
6. Improves Relations: The Top-Level Managers coordinates the activities of the
Middle Level Managers and develop good relations with them. Similarly, the Middle
Level Managers coordinate the activities of the Lower-Level Managers and develop
good relations with them. Also, the Lower-Level Managers coordinate the activities
of the workers and develop good relations with them. Thus, coordination, overall
improves the relations in the organization.
7. Higher Efficiency: Efficiency is the relationship between Returns and Cost. There
will be higher efficiency when the returns are more and the cost is less. Since
coordination leads to optimum utilization of resources it results in more returns and
low cost. Thus, coordination leads to higher efficiency.
8. Improves Goodwill: Coordination helps an organization to sell high quality goods
and services at lower prices. This improves the goodwill of the organization and helps
it earn a good name and image in the market and corporate world.
9. Resolving Conflicts: Many conflicts and rivalries between individuals, in between
departments, and also between a line and staff gets ended due to the coordination
among the departments.
10. Unity in Diversity: Every large organization has a large number of employees, each
with a different vision or ideas, activities and background. Therefore, there are
different functions in an organization. However, all these activities would not be so
effective without communication. Therefore, cooperation is essential for unity in
diversity.

Types of coordination

1. Vertical Coordination: Vertical coordination is the coordination between different

levels of the organization to ensure that all levels of organization are in harmony with
the organizational policies and programmes. This is achieved through delegation of
authority by directing and by controlling.
2. Horizontal Coordination: Horizontal coordination is the coordination between
departments on the same level of managerial hierarchy. Coordination between
production and marketing departments at the same level or organizational hierarchy is
 an example of horizontal coordination. This is achieved by forming cross-functional
teams and self-managed teams.
3. Internal Coordination: Vertical and horizontal types of coordination, if carried out
within an organization, are called internal coordination. Internal coordination is
achieved through following techniques:
4. External Coordination: Success or failure of an organization also depends on
number of external forces. No organization can operate in isolation, it has to
continuously interact with dynamic environmental forces and devise its strategies to
respond to such forces to survive

Constraints of Coordination

Co-ordination cannot be achieved by force or imposed by authority. Achieving co-ordination

through orders is a futile exercise. There are situations or problems that make achieving
coordination a very difficult task.

1. Poorly Defined Objectives: It will be impossible to achieve co-ordination if the goals

of the enterprise are not clearly defined. Every individual and each department must
understand what is expected of them by the organization. Top management must
clearly state the objectives for the enterprise, as a whole. The various plans
formulated in the enterprise must be inter-related and designed to fit together. Only
then the organization can be coordinated.
2. Improper Division of Work: Division of work is one of the most important
requisites of effective organizing. If the tasks are not differentiated and assigned to
individuals according to their skills and qualification, it will be quite difficult to
coordinate the activities of the enterprise.
3. Ill-Structured Organization: When the degree of formalization, span of control
degree of centralization etc. are not clearly understood and activities are not properly
departmentalized a very poorly structured organization will emerge making
coordination very difficult.
4. Ill-Defined Lines of Authority: Coordination can never be achieved if the lines of
authority are not clearly defined. Authority must be delegated in a clear way. The
individual must know, what is expected of him by his superior(s). Once authority is
accepted, the subordinate must be made accountable for results, in his work area.
There should be no room for overlapping of authority and wastage of effort(s).
5. Poor Communication: A smooth flow of two-way communication is prerequisite of
co-ordination, if sound communication networks are not developed, an enterprise can
never be coordinated. Personal contact is generally considered to be the most effective
means of communication for achieving co-ordination. Other means of communication
such as records, reports, may also be used in order to supply timely and accurate
information to various groups in an organization.
6. Ineffective Leadership: According to McFarland, real coordination can be achieved
only through effective leadership. Top management, to this end, must be able to
provide:
 A conducive work environment,
  Proper allocation of work,
 Incentives for good work, etc.
It must persuade subordinates, to have identity of interests and to adopt a
common outlook.
11. Increase in Conflicts: Individuals join an organization to meet their needs. In many
cases, these needs may differ from the needs and goals of the group. In such cases, the
goals of the organization and of the individual are not fully realized. When the
number of individuals in an organization increases, the level of such inconsistencies
increases.
12. Misunderstanding: In a large organization, hundreds of employees work together
and participate every day. Ideally, they should be cohesive and work as a team. In
many cases, however, misunderstandings arise between employees that create a
problem in cooperation.

Techniques of Coordination

Every manager must remove the obstacles that determines coordination by adopting the
following specific techniques:

1. Chain of Command: This technique also emphasizes that an employee should

receive orders form one superior only because dual command is a continuous source
of conflict. Management has to exercise authority to regulate the performance of
different departments because clear cut authority relationship helps in reducing
conflicts among different departments.
2. Leadership: Co-ordination becomes possible through leadership as it provides
individual motivation and persuades the group to have an identity of interests and
outlook in group efforts. To achieve the common objectives of an enterprise, the
manager must guide and co-ordinate the activities of his subordinates.
3. Committees: This Technique of achieving co-ordination is used in most
organizations by forming a committee. Which helps to promote unity of purpose and
uniformity of action among different departments. A committee is a group of persons
and the decisions of the committee are group decisions which provide co-ordination
among various activities and persons through information, advice interchange of ideas
etc., while forming the committee utmost care must be taken by the management,
otherwise, the decisions taken by the group may not be effective to achieve co-
ordination in an enterprise.
4. Communication: Effective communication conveys ideas, opinions or decisions of
managers to subordinate at different levels of the organization and carries back
information, suggestions and responses from subordinates. It regulates the flow of
work, co-ordinates the efforts of the subordinates of an enterprise. To be effective,
communication must be as direct as possible so as to minimize the chances of
misinterpretation. To ensure proper co-ordination, various kinds of communication
channels may be used, such as verbal relay of information, written reports memos or
other forms of documents, mechanical devices such as teletypes, intercommunication
system, etc.
 5. Voluntarily Coordination: Self-co-ordination or voluntary co-ordination is possible
in a climate of mutual co-operation, when two or more persons working within the
same or different departments, mutually discuss their problems and arrive at a
coordinated action. This can be easily achieved in any organization, when the
supervisor gives his consent without any hesitation for such a mutual consultation
among subordinates.
6. Sound Planning and Clear-Cut Objectives: The objectives of the organization and
policies must be clearly defined by the management. A well-conceived plan must
clearly define the goals of the organization so that interdepartmental objectives can be
accomplished. Thus to ensure co-ordination, clear formulation of policies in the field
of production, sales, finance, personnel, etc., must be correlated.
7. Incentives: Incentives have a tendency to ignite action and bring about co-ordination.
In order to infuse enthusiasm in a worker for greater and better work, incentives have
a distinct and significant role. Financial incentives which include wage, bonus, salary,
etc., and no-financial incentives which include job security of interest, to achieve co-
ordination and to reduce conflicts.
8. Direct Contact: One of the most effective means of achieving coordination is direct
contact. Written communication, modern electronic, mechanical devices, etc., can
also be used.
9. Group Meetings: Group meetings are said to be an effective means of achieving
coordination. At the time of meeting, superior comes into personal contact with those
connected with the actual problems. Such meetings encourage the people to integrate
their efforts. Coordination can be achieved through regular meetings of superiors and
subordinates.
10. Staff Meetings: Staff meetings at regular intervals helps in achieving effective
coordination because such meetings provide opportunities for frank discussions and
better exchange of ideas of people from different sections. This infuses a feeling of
unity among the members which makes them to jointly work for the organization.
11. Informal Coordination: Many organizations adopt informal means of coordination
through processes of social, unofficial interactions, relationship and mutual
adjustments. They are very often more effective than formal means.

Management by Objectives

Management by Objectives (MBO) or otherwise called as Management by Results (MBR) is

management philosophy which was first propounded by Peter F. Drucker in the year 1954, in
his book “Practice of Management”.

Management by objectives is the process of defining specific objectives within an

organization that management can convey to organisation members, then deciding how to
achieve each objective in sequence. This process allows managers to take work that needs to
be done one step at a time to allow for a calm, yet productive work environment. This process
also helps organization members to see their accomplishments as they achieve each objective,
which reinforces a positive work environment and a sense of achievement.
An important part of MBO is the measurement and comparison of an employee'
actual performance with the standards set. Ideally, when employees themselves have been
involved with the goal-setting and choosing the course of action to be followed by them, they
are more likely to fulfill their responsibilities.

According to George S. Odiorne, the system of management by objectives can be described

as a process whereby the superior and subordinate jointly identify common goals, define each
individual's major areas of responsibility in terms of the results expected of him or her, and
use these measures as guides for operating the unit and assessing the contribution of each of
its members.

Process of MBO

1. Setting of Goal: The first step in an MBO programme is the establishment of clear
and concise goals of performance which are understood and accepted by both superior
and subordinate. Initially, the superior determines his objectives and general
programme. Then, he meets his immediate subordinates and explains his objectives
and plans for the group.
In all these goals-setting sessions, the emphasis is on setting measurable goals. For
example, goals might be defined in terms of specific increase in sales volume,
production, output or quality improvement.
2. Preparation of Action Plan: The action plan is the means by which an objective is
achieved. The action plan will set out in detail exactly what is to be done, how the
subordinate will proceed, what steps will be taken, and what activities will be engaged
in, as the subordinate progresses. There are two ways of developing specific action
plans; they may be developed by both manager and subordinate or by the subordinate
alone.
3. Monitoring Process: The process should be monitored at all times, as results will
determine the future plans. It also prevents the management from losing track of
progress. By doing so, organizations can avoid failures by spotting flaws in the
process early on.
4. Evaluating Performance: In MBO process, performance appraisal involves short-
range and long-range evaluation in which superiors discuss with subordinates and find
out problems encountered in efforts to achieve predetermined goals. Performance ap-
praisals must be based on mutual trust and confidence between managers and
subordinates.
5. Feedback: All employees must get a clear response on their performance. If they do
well, they should be rewarded. This motivates them to keep up the good work.
Employees who did not achieve the goals, however, need to figure out the flaws in
their process. They need to come up with a strategy to overcome the flaws and
improve.

Example for Understanding MBO

Consider the following example emulating the steps of management by objectives.

  The financial department wants to raise $1 million in funding, increase financial
automation by 10% and the shareholder’s profits by 5%. After debating these goals
with the heads of the department, they decide to talk with the employees to set their
objectives.
 All employees would be focused on one of these three points. For instance, those
focused on technology would handle automation, while the business team would work
with the investors to ensure the funding.
 If the marketing department wants to create 1,000 new leads per month,
increase return on investment (ROI) by 6%, and landing page conversions by 25%,
they will need to follow another strategy.
 Subsequently, they need to devise objectives and communicate with the people. They
need to interact with those in charge of creating leads and landing pages. This way,
they can improve conversions and get a higher ROI.
 For both examples, the heads of the department need to collaborate and assess the
results. By evaluating successes and failures, they can promote changes and define
goals for the future.

Many noteworthy companies have used MBO. The management at the computer
company Hewlett-Packard (HP) considers the policy a huge component of its success. Many
other corporations praise the effectiveness of MBO, including Xerox, DuPont, and Intel.

Advantages of MBO

The concept of MBO is very important in terms of its managerial implications. Besides being
a philosophy of management, it is a system which helps in synchronizing the objectives of the
individuals with the objectives of the organization. When implemented properly,
systematically and consciously, the MBO has the following advantages:

1. Improved Performance: MBO is basically a result-oriented process. Its main focus

is on setting and controlling goals. Managers are encouraged to do detailed planning.
They concentrate on the important task of improving performance by reducing the
costs and harnessing the opportunities. Improved planning will lead to improved
productivity arid more profits.
2. Sense of Identification: The individual members of the organization have a greater
sense of identification with the company goals. With MBO, the subordinates feel
proud of being involved in the organizational goals. This improves their morale and
commitment to the organizational objectives.
3. Utilization of Human Resources: Since the goals are set in consultation with the
subordinates, these are more difficult to achieve and more challenging than if the
superiors had imposed them. In addition, since these goals are fixed according to the
particular abilities of the subordinates, it obtains maximum contribution from them
and thus it leads to maximum utilization of human resources.
4. No Ambiguity: There is no role ambiguity or confusion in the organization, because
specific and clear goals are set for the organization, for the division for the
 departments and for the individual members. Both the managers and the subordinates
know what they have to do and what is expected of them.
5. Better Communication: In MBO, there is improved communication between the
management and the subordinates. This continuous two-way communication helps in
clarifying any ambiguities, refining and modifying any processes or any aspects of
objectives.
6. Improved Organizational Structure: In MBO, the whole of organizational structure
is redesigned because of the revision of job descriptions of various positions as a
result of resetting of the individual goals. All this helps in improving the
organizational structure as a result of location of the problem and weak areas of the
organization.
7. Organizational Control: MBO serves as a device for organizational control and
integration. If there are any deviations discovered between the actual performance and
the goals, these can be regularly and systematically identified, evaluated and
corrected.
8. Career Development: MBO provides a realistic means of analyzing training needs
and opportunities for growth for the employees. The management takes keen interest
in the development of skills and abilities of subordinates and provides an opportunity
for strengthening those areas which need further refinement, thus, leading to career
development of employees.
9. Performance Evaluation: The system of periodic performance evaluation lets the
subordinates know how well they are doing. In MBO, strong emphasis is put on
measurable and quantifiable objectives. As a result, the appraisal tends to be more
objective specific and equitable. As these appraisal methods are based on result and
not on some intangible characteristics, there are considered to be superior to the trait
evaluation methods of appraisal.
10. Motivation of the Employees: The system of MBO stimulates the employee’s
motivation. First of all, they feel motivated because of their participation in goal
setting. They take keen interest in the implementation of the goals which they
themselves have set. Secondly the appraisal system, being very objective and specific
can be highly morale boosting.

Limitations of MBO

A system of MBO has certain weaknesses and limitations. Some of these are inherent in the
system while some arise when introducing and implementing it. Some of the problems and
limitations associated with MBO are as explained below:

1. Lack of Support of Top Management: In traditional organizations, the authority is

vested in the top management and it flow from top to bottom. In MBO, subordinates
are given an equal opportunity of participation, which is resented by the top
management. This system cannot succeed without the full support of top
management.
2. Resentful Attitude of Subordinates: The subordinates can also be resentful towards
the system of MBO. Sometimes, while setting the goals, they may be under pressure
 to get along with the management and the objectives which are set may be
unrealistically high or far too rigid. The subordinates, generally, feel suspicious of the
management and believe that MBO is another play of the management to make them
work harder and become more dedicated and involved.
3. Difficulties in Quantifying the Goals and Objectives: The MBO will be successful
only if the goals can be set in quantifiable terms. But if the areas are difficult to
quantify and difficult to evaluate, it will not be possible to judge the performance of
the employees. Moreover, MBO does not have any subjectivity in performance
appraisal. It rewards only productivity without giving any consideration to the
creativity of the employees.
4. Costly and Time-Consuming: MBO is quite costly and a time-consuming process.
There is a lot of paper work involved. Moreover, there are a lot of meetings and too
many reports to be prepared, which add to the responsibilities and burden of the
managers. Because of these reasons managers generally resist the MBO.
5. Emphasis on Short Term Goals: Under MBO, goals are set only for a short period,
say for six months or one year. This is because of the reason that goals being
quantitative in nature, it is difficult to do long range planning. Since the performance
of the subordinate is to be reviewed after every six months or one year, they tend to
concentrate on their immediate objectives without caring for the long-range objectives
of the enterprise. This emphasis on short term goals goes against the organizational
efficiency and effectiveness and is not a healthy sign.
6. Lack of Adequate Skills and Training: Most of managers lack adequate skills,
knowledge and training required in interpersonal interaction which is required in the
MBO. Many managers tend to sit down with the subordinate, dictate the goals and
targets with no input permitted from the subordinates and then demand that the goals
be achieved in a specified time. Whether the goals are realistic or not does not enter
the picture. In this type of environment, two-way communication is not there and
objectives are imposed on the subordinates. This destroys their morale, initiative and
performance.
7. Poor Integration: Generally, the integration of the MBO with the other systems such
as forecasting and budgeting is very poor. This lack of integration makes the overall
functioning of the system very poor.
8. Lack of Follow Up: Under the system of MBO, the superior must get in touch with
the subordinate at the appropriate time and at that time, the subordinate will inform
the boss exactly what has been accomplished and how. If the superior delays the
meeting, it will create hurdles in the successful implementation of MBO as the
subordinate will also start taking the programme casually.
9. Difficulty in Achievement of Group Goals: When goals of one department depend
upon the goals of another department, cohesion is difficult to maintain. In such cases,
the achievement of goals will also become very difficult.
10. Inflexibility: MBO may make the organization rigid. As the goals are set after every
six months or one year, the manager may not like to revise the goals in between, even
if the need arises, due to fear of resistance from the subordinates. The managers must
 learn to handle this situation, because sometimes revision of short-term goals is
necessary for the achievement of long-range objectives.
11. Limited Application: MBO is useful largely for the managerial and professional
employees. It is not appropriate for all levels and for everyone because of the heavy
demands made by it. It can be made applicable only when both the subordinates and
manages feel comfortable with it and are willing to participate in it.
12. Long Gestation Period: It takes a lot of time, sometimes 3-5 years to implement the
MBO programme properly and fully and some research studies have shown that these
programmes can lose their impact and potency as a motivating force over a long
period of time.

Prerequisites for Installing MBO

Following are the prerequisites for installing MBO programme:

1. Defining Purpose: The first thing for implementing MBO programme is to define its
purpose. Different organisations may have different purposes to be achieved from
MBO programme.
Howell suggested three stage evaluation of MBO:
 Management appraisal and development
 Improvement of productivity and profitability
 Long-range planning.
An organisation may like to use MBO for improvement of its productivity, another
may use it for improving managerial efficiency. In the absence of a definite purpose
MBO will not be a useful exercise.
2. Support from Top Management: In order to succeed MBO programme must have
the support of top management. The subordinates will implement this programme
effectively only when they are sure of the sincerity of top management in pursuing it.
MBO is a method of managing effectively, it is a continuous process and not a single
time activity.
Managers will discuss with subordinates their targets and will regularly evaluate their
performance. If the performance is lower than the predetermined standards then the
causes of deviations are ascertained and corrective actions are taken. Top
management will have to show a constant interest in MBO programme otherwise it is
likely to fail.
3. Training for MBO Programme: The success of any programme depends upon the
knowledge of the persons implementing it. If they understand what they are
implementing then others can be explained about the concept, philosophy and need
for such a programme.
The persons implementing MBO should be given proper training about the
programme and its implementation. If people are not sure about the aims of the
programme then they will find difficult to implement it. There is a need for structural
 change, behaviour change and attitude change for making the programme effective
and successful.
4. Participation: In order to secure commitment of subordinates for the programme,
there is a need for participation by everybody in the organisation. Subordinates should
be made an integral part of this system. In case subordinates take MBO as any other
method for evaluating their performance then it will not succeed.
Subordinates should participate in setting their objectives and deciding their areas of
accountability. The areas of participation, however, may vary according to the area of
activity and the level of hierarchy. The type and extent of participation will vary from
organisation to organisation.
5. Feedback: In MBO system every individual decides and controls his own
performance. The person working under such a system should regularly know his
performance and standing. In case the performance is not as per the goals then
required correctives will be undertaken. The feedback will help in learning and
improving situations. There should be periodic counseling and appraisal interviews
where superior helps the subordinate in knowing his good and bad points and making
suggestions for future improvements.

Management Information System

A management information system (MIS) is a computer system consisting of hardware and

software that serves as the backbone of an organization’s operations. An MIS gathers data
from multiple online systems, analyzes the information, and reports data to aid in
management decision-making.

MIS is the use of information technology, people, and business processes to record, store
and process data to produce information that decision makers can use to make day to day
decisions. The full form of MIS is Management Information Systems. The purpose of MIS
is to extract data from varied sources and derive insights that drive business growth.

Components of Management Information System

1. Executive: Executives are the people who utilize MIS. These people are computer
professionals who operate MIS for data processing to achieve organizational goals
like planning and decision-making.
2. Hardware: The hardware components of MIS include various input and output
devices that helps in feeding data as well as displaying the information when required.
The input devices include the keyboard, scanners and mouse. The output devices may
be the monitor, printer, network devices, and so on.
3. Software: Computer programs which are designed to do a specific task for example,
MS Office, Banking Software’s, Railway’s applications etc, different kinds of
software available to process the data/information in an organization such as ERP
(enterprise resource planning) and CRM (customer relationship management).
4. Data Collection: MIS executes the data through computer system using the sources
of an organization. The organizational data is stores in computer system or as a paper
record by its end users.
 5. Data Processing: Processing data includes converting the storage data into the
required information to take beneficial actions. Data processing includes
mathematical and logical operations like, calculations, sorting, classifying and
summarizing the data.
6. Organizational Procedures: Procedures are sets of rules or guidelines that an
organization establishes for the use of a computer-based information system. The
procedures may vary from one organization to another. It may also vary from one
department to another as per the requirement. For example, the working of production
department is different from the working of sales department. The production
department requires information regarding the raw material or quantity of goods to be
produced. So, the production department sets its procedures in such a way that the
MIS system helps in retrieving the information required by the department. In the
similar way, the sales department requires information regarding the quantity of goods
sold and the other expenses that occurred during the sales of the product. Therefore,
the sales department sets the procedures in such a way that they get only that
information which is required from the MIS.
7. Information Storage and Retrieval: MIS stores data as an organizational record and
processed for future use. The data organizes as a fields, records, files and databases
for future use. Information retrieval comprises to access the stored data as per the
requirements of the management users.
8. Disseminating Management Information: The information of finished product is
categorizing and dispersed to the users in an organization as per the needs. This
information could be periodic, through reports or online through computer terminals.

Decision Making

Decision making is the process of making choices by identifying a decision, gathering

information, and assessing alternative resolutions.

A decision is the selection of a course of action (or decision) out of many available
alternatives.

Haynes and Massie: “Decision-Making is a process of selection from a set of alternative

courses of action which is thoughtful to fulfill the objective of the decision problem more
satisfactorily than others.”

Philip Kotler: “A decision may be defined as a conscious choice among alternative courses
of action.”

George R. Terry: “Decision making is the selection based on some criteria from two or
more possible alternatives.”

Essentials of Effective Decision Making

Decision-making is one of the most important functions of a manager. Every manager has to
routinely make decisions that can have drastic consequences. Because of the unpredictable
nature of the effects of these decisions, managers must be very careful. They can always refer
to some general guidelines for effective decision making for this purpose.

1. Multiple Decentralize Centers: Centralization of powers is always a hindrance in

large organizations. This is because such business structures have people with diverse
responsibilities functioning at various levels. In this case, it is inadvisable to hoard
decision-making powers in a few hands at the top level. This is why managers at all
levels must have adequate decision-making powers. Furthermore, they must also be
answerable to a centralized authority at the top. This makes decision-making quick as
well as effective.
2. Distribution of Workload: The responsibilities of decision-making must exist at all
levels in reasonable proportions. If the top level of management keeps more powers
with itself, its workload increases. This, in turn, makes it less efficient.
3. Effective Communication: Apart from distribution of workload at all levels, there
must be an effective communication system as well. Co-ordination between all levels
makes work easier, efficient and consistent.
4. Advisory Units: Each level of decision-making must have a team of advisory units.
These units could comprise of staff members as well as outsiders in a limited
capacity. The main responsibility of these units is to provide intelligent and creative
expertise in decision-making.
5. Regulatory Framework: This is one of the most important guidelines for effective
decision making. There must always be several tools for regulating the process of
decision-making.
For example, managers must frame effective rules, policies, goals, and procedures for
this purpose. Furthermore, the management must ensure that they update this
regulatory framework as per requirements. They should also communicate all changes
to managers immediately.
6. Decision Support System: All levels of management must have effective decision
support systems. These include information and control systems that make
communication easier for managers. The management at all levels should use these
systems to get logistical support for decision-making.
7. Flexibility: A decision taken cannot satisfy everyone. Rigidity while making
decisions can affect the decision-making process. The decision-maker needs to have a
flexible mental disposition. It will help win the cooperation of all the diversified
groups in an organization. Flexibility in different types of decisions helps in
maintaining peace and harmony in an organization.
8. Participation by Decision Maker: Equal involvement by the decision-maker in
implementing his decisions is very important. He must only observe others but
perform himself. This will help him in understanding the practicality of his decisions
and guide his future decisions.
9. Chain of Actions: In any organization, there exists a chain relationship between
different activities. A decision taken to change one work can affect the other works
also. Thus, it is very important to consider the chain relation between various
activities of an organization.
 10. Evaluating Decision: Decisions are taken to carry out the objectives of an
organization. The most important aspect of any decision-making process is evaluating
the decision after it has been taken. Structuring the in-progress reviews can help in
analyzing whether the after-effects of the decision. It helps in understanding what is
working for the company and what is not.

Techniques of Decision Making

1. Intuition: It is making a choice without the use of conscious thought or logical

inference. It is important for a manager to develop his intuitive skills because they are
as important as rational analysis in many decisions. When managers make decisions
solely on hunches and intuition, they are practicing management as though it were
wholly an art based, only on feelings. The intuitive approach refers to the approach
used when managers make decisions based largely on hunches and intuitions.
2. Management Information System: Management information systems (MIS) are
reporting systems which summaries, collate and present information on a certain
activity such as processing a transaction. It is a comprehensive computer system for
providing financial and qualitative information to all levels of management.
In general middle-level managers focus mainly on internal activities and information,
higher- and top-level managers also remain engaged in external activities. However,
middle-managers are the largest MIS user group. Since they use this technique
extensively and frequently, they need networked information to plan such emerging
activities as employee training, materials handling and cash flows.
3. Decision Support System: With Internet-hosted databases and user-friendly query
tools becoming more common, corporations are turning to decision support system
(DSS) software to analyse the firm’s databases and turn them into information useful
for decision making. DSS typically includes analytical and report-writing features,
thus enabling users to translate new data into a form useful for decision support.
4. Delphi Techniques: The Delphi technique is an approach to generating new ideas or
problem-solving amongst a group or team. Each member or interested party submits
his or her recommendations or views on the issue under review to a central contact
point. All ideas generated in this way are then circulated to all those participants in the
process, who then have the opportunity to submit comments on them.
5. Brainstorming: Brainstorming is a powerful decision-making technique used to
extract ideas from a group of people. For brainstorming, groups are formed and each
individual is provided with a platform to explore and express their ideas to others.
Brainstorming may be used by an organisation for multiple objectives such as solving
a problem, generation of new ideas, team development, etc.
6. Nominal Group Technique: Nominal Group Technique is a variation of
brainstorming technique. It is a structured process of obtaining the group’s opinions,
ideas, suggestions, etc. Unlike brainstorming, in Nominal Group technique, each
member is acquainted with the problem or issue under consideration and is required to
pen down his opinion and suggestion on a piece of paper.
 Thus, initially no discussion is permitted amongst members. After all participants
have given their ideas, then each one’s proposition and suggestion is discussed in an
interactive manner within the group.
7. Multi-voting: Another group decision-making tool is multi-voting. In this method,
repeated rounds of voting are carried out until a consensus is arrived at. In this
method, each participant presents his opinion or proposition in front of the panel and
each member casts a vote. When voting for every participant’s suggestion is
completed, the strategies or suggestions with highest voting qualify for the next
round. This process is continued until a clear unanimous strategy is voted.
8. Didactic Interaction: This is a very useful decision-making technique when
decisions to be taken are dichotomous in nature. The solution to such decisions is in
terms of either “yes” or “no” decision. For example, to purchase machinery or not to
purchase, to import or not to import, to sell or not to sell, etc. These decisions are
mutually exclusive, i.e., acceptance of one decision automatically results in rejection
of another.
For this method, instead of one group of experts, two group of experts are created, one
favouring a “yes” decision and other favouring a “no” decision. Each group then
generates the list of justifications for their decisions and then interacts and discuss
with their findings. With mutual interactions and discussions, both the groups arrive at
a consensus and a decision is taken.
9. Decision Matrix: Decision matrix method is a quantitative technique used to rank the
multi-dimensional options available for an underlying problem. This technique is
primarily used when various alternatives are available and many different parameters
are to be considered for making a selection.
10. Cost-Benefit Analysis: Cost benefit analysis is a systematic process for evaluating
the feasibility of projects or proposals under consideration. As the name indicates, this
method aims at comparing total benefits derived from a project with the total costs
incurred for the same.
11. Payback Analysis: Payback period may be defined as the period within which initial
investment of a project is recovered. In other words, it tells how long a project will
take to recover its initial investment. As a decision-making tool, on the basis of
payback period, a manager may decide which project to accept and which to reject. A
project with less payback period is preferred over others as it is fastest in recovering
its investment.
12. Decision Tree Analysis: Decision tree analysis may be defined as a decision support
tool which makes use of a tree-like graph, i.e., branching and depicting all possible
decision alternatives for a particular problem. A decision tree is a pictorial method
which starts with a root, i.e., underlying problem or decision to be made.
Decision trees, besides being pictorial, are also helpful in effective decision-making
as they involve a systematic and formalized process leading to the presentation of
holistic view of various alternatives to a particular problem and their respective
consequences or outcomes.
13. Simulation: Simulation may be defined as an imitation of a real-life situation. As a
decision-making technique, simulation is used by creating a replica of real-life
 situation so as to know what could be an outcome under real operating conditions.
Simulation technique primarily aims at answering “what if’ questions about real-life
situations.
14. Network Analysis: Network analysis refers to use of network techniques for solving
large, complex problems comprising of many interrelated activities to be performed in
a particular order. For example in metro construction, bridge construction, etc.,
network analysis is applicable for successful completion of projects within time.
Network is a graphical presentation of these interrelated activities in the order of their
occurrence connected through arrows and depicted by nodes. Network analysis aims
at developing a network and then planning, scheduling and controlling of performance
of activities of a large complex project.
15. Operations Research: Operations research may be defined as a scientific method
making use of various tools and techniques to quantitatively provide solutions to the
problems. As a quantitative decision-making technique, operations research is very
widely used to solve a wide variety of problems. With the help of applying operation
research techniques, management is able to solve many complex problems through a
systematic and objective methodology, which is subject to minimal biases.

Impact of Technology in Decision Making

1. Collaboration Platform: When it comes to decision making, it is important to have a

secure and reliable communication platform in place. A collaboration system will help
in streamlining team communication so that team can focus on making better and
more informed decisions, instead of spending time setting up and organizing
meetings. A good collaboration platform allows team to set up efficient
communication channels that fit team’s specific needs.
2. AI and Big Data: Big data is a term used to describe massive amounts of data that
cannot be processed using conventional computer software and hardware. AI tools are
able to process big data and analyze it so firm can make better, quicker decisions.
When organization have AI tools that analyze big data, team cam makes better
decisions about future marketing initiatives and product development. AI analytics
will help team take proactive steps to prevent problems before they happen.
For instance, once team have an AI tool in place to analyze big data such as text
classification of customers emails, messages and support requests, they can use it for
a variety of decision-making processes.
3. Automate Repetitive Task: Decision-making is a time-consuming process
depending on the complexity of the issue at hand. Sometimes, it’s hard to find the
time to deal with important decisions. In such cases, it is better to automate repetitive
tasks that free up manager’s decision making capacity and free up to focus on more
important issues. Automation is applicable to any aspect of business, from marketing,
distribution management, sales to customer support etc. Automation helps manager to
eliminate repetitive tasks that steal precious time from decision-making processes.
4. Centralized Repository of Information: A centralized repository of information that
contains key data about company and product is helpful when making decisions. A
 centralized repository is also used to store important documents and data about team
members, partners, and clients. It helps team to centralize information so it is easier to
find when they need it. Data is critical in decision making. It helps team to make
informed decisions, and avoid being biased towards one option or another. With a
centralized repository, organization can collect data from multiple sources to make
decision-making process faster and more efficient.
5. Transparency and Trust: Transparency and trust are two essential ingredients for a
successful business. If there is no transparency in the decision-making process, some
people will feel left out of the decision-making process.
A lack of trust in the decision-making process creates barriers to innovation, and
stifles creativity within the organization. Trust in the decision-making process is
critical. It helps in attracting better employees, partners, and customers.
Technology helps firm in building a culture of transparency and trust within
organization. It helps in making decision-making process more transparent so that
everyone knows what is going on. With the help of technology, firm can share
important information with team members, clients, and stakeholders in real time. The
firm can also use a platform like Zoom for an online meeting so that everyone feels
included in the decision-making process.
6. Virtual Reality: Decision-making becomes a lot easier when team can see all the
potential outcomes of decision. Virtual reality helps in visualizing different scenarios
and make better decisions in a shorter amount of time.
Virtual reality is used for a variety of decision-making processes. The team can use
VR to visualize potential outcomes of decision, choose between different products or
services, or examine specific problems or issues. Virtual reality also helps in making
more informed decisions. It's used to examine different scenarios, product life cycles,
and impacts of certain changes in business.
7. Real Time Feedback: Real-time feedback helps organization make better decisions
by eliminating the guesswork and allowing team to see how decisions impact
customers. Real-time feedback is accessed via a feedback channel on the
communication platform firm use in the organization. Team can use real-time
feedback to make better decisions based on what stakeholders and customers really
want or need. Team can use real-time feedback to get feedback from customers, team
members, and stakeholders on the product, the services, and the marketing approach.
Feedback is critical to decision making, especially when firm is trying to make an
informed decision.
8. Automate Business Process: Automating business processes helps team to make
better decisions in a variety of ways. It helps in eliminating bottlenecks that are
slowing down decision making, provide accurate data that makes decision-making
process more reliable, and provide better customer experiences by eliminating the
need for manual and redundant tasks.
9. Real Time Collaboration: Collaboration tools help in making better decisions
because they allow to bring together people with different perspectives, experiences,
and ideas. These tools also help in improving team collaboration and encourage better
teamwork. They help in sharing content, communicate, and collaborate with team
 members in real-time. The real-time collaboration tools facilitate remote decision
making. Collaboration tools like Zoom are used to bring together people from
different locations, time zones, and cultures so they are involved in the decision-
making process.
10. Cost Management: Technology has helped to reduce unnecessary business costs and
increase profitability. However, it has also led to a rise in the cost of running
businesses. The cost of running a business is not only about money, but also about
time and effort. Businesses that run on a constant schedule will have to pay for human
resources and office space costs, as well as transportation costs. The cost of running a
business depends on the type of business and how well it runs over time. Costs are
reduced through the use of technology in business. The use of technology helps to
save money by making decisions faster and cheaper than before.
For instance, many businesses that use IBM Watson or IBM Watson Enterprise Cloud
make better decisions with more efficiency because they do not need to spend hours
or days doing repetitive tasks like marketing campaigns or customer support calls.

Problem Solving Approach

1. Rational: One of the most common problem-solving approaches, the rational

approach is a multi-step process that works well for a wide range of problems. Many
other problem-solving techniques mirror or build off of its seven steps, so it may be
helpful to begin with the rational approach before moving on to other techniques.
Here are the seven steps of the rational approach:
 Define the problem.
 Identify possible causes.
 Brainstorm options to solve the problem.
 Select an option.
 Create an implementation plan.
 Execute the plan and monitor the results.
 Evaluate the solution.
2. Collaborative: This approach involves including multiple people in the problem-
solving process. Brainstorming should include a diverse group of stakeholders:
people who are affected by the problem and/or may be affected by any changes made
in an attempt to solve it.
3. Creative: The creative approach mirrors the rational approach but places greater
emphasis on the brainstorming phase. People using the creative approach utilize
ideation techniques such as mind mapping, storyboards and analogies.
4. Historical: The historical approach is helpful when the problem organization facing
has precedent within field or industry. Researching how others have solved the
problem can guide firm in developing solution.
5. The Simplex Process: The Simplex Process is an eight-step approach similar to the
rational approach, but tailored for situations in which team is unsure of what the
problem actually is. It begins with problem-finding and research, where users collect
the information necessary for defining the problem. Users then move through idea-
 finding, evaluation and selection and planning. They then encourage their peers and
stakeholders to take active roles in implementing their plan, to soften any resistance
to change. Finally, users execute their plan and monitor the results.
6. Issue Based: A five-step approach often employed in consulting firms; the issue-
based approach is useful when helping another person solve a problem they're facing.
The user first creates a proposal that defines the problem and inventories the client's
expectations. Next, the user diagrams the smaller issues that comprise the problem,
then uses this diagram to help them design a solution. The user then conducts
extensive research and synthesizes their data into a revised solution. Finally, they
present their materials to the client and demonstrate why their solution is effective.
7. The 5 Why: This approach can help in getting to the root of a complex problem.
Begin by asking why the problem occurred, and then ask the same question about
your response. For example, if you answer that productivity has stagnated because
morale is low, follow up by asking, "Why is morale low?" Ask "why" a total of five
times. Doing so will help in finding the problem's root cause.
8. Failure Mode and Effects Analysis (FEMA): FEMA is unique among problem-
solving approaches in that its goal is generally to preempt problems. A team of
experts lists the functions of a product and then identifies every possible failure for
each function. The team estimates the probability that each failure will occur, then
rates its severity and detectability. The team uses these figures to calculate the risk
priority number of each failure, revealing which problems should be addressed first.
9. Means-Ends Analysis: Means-end analysis is especially useful for big-picture
problems because it shifts the focus from the problem itself, which might feel
overwhelming, to the goal that firm want to achieve. After envisioning goal, team can
work backward to identify the obstacles that lie in the path. Overcoming these
smaller obstacles one at a time makes solving a large problem more manageable.
Conversely, having an ultimate goal in mind can guide decision-making as team
address the smaller obstacles in the path.
10. SCAMPER: SCAMPER is an acronym for substitute, combine, adapt, modify, put
to another use, eliminate and reverse, terms that represent options for improving a
problematic product or service:
 Substitute: Consider substituting elements of the product or service for
something else.
 Combine: Ask yourself whether you could improve it by combining it with
another product or service.
 Adapt: Consider whether the product or service would be more effective if
you adapted it to another target audience.
 Modify: Ask yourself which features it might be beneficial to modify.
 Put to another use: Determine whether your product or service would be more
effective if put to another use.
 Eliminate: Identify any unnecessary features you might eliminate to improve
the product or service.
 Reverse: Imagine what would happen if you reconfigured the product or
reversed the process of producing it.
 11. Organic: The organic approach provides an alternative perspective on the nature of
problems. It assumes many problems are too intricate to fix by following a set of
linear, generic steps. Instead, the organic approach calls for users to identify their
visions and values, as well as identify actions they can take to realize them. In this
way, the organic approach places importance on the problem-solving process rather
than its results.
Problem Solving Process

The eight-step problem-solving process is a structured method that guides team through the
various steps of solving issues. Unlike other problem-solving processes that are often broad,
the eight-step method takes through each individual step, from identifying the problem to
taking actionable steps to success.

Instead of changing a few things at a middling level that will probably break down again
later, team can unearth the roots of problems and build success from the ground up.

1. Identify the Problem: The first step in the process is to identify the problem.
Identify why this is a problem, how team has discovered it and how it impacts
business. Also note when the problem started and how long it has been going on. If
the problem is small, team can try to contain it and may not need additional steps to
fix it. However, if the problem is complex, move forward through the process.
2. Define the Problem: The next step involves breaking down the problem and
defining what it is. It’s important to be as clear as with this step because a vague
problem will hinder the process, whereas a clearly defined issue will allow to take
actionable steps to fix it. Analyze factors like how high of a priority it is to solve the
problem. The team can also look to data and other resources to clarify and
understanding problem.
3. Find the Root of the Problem: Often problems are byproducts of deeper, more
central problems, so make sure team dig deep enough to find out what is really
causing the issue. If the problem is large and complex, break it down into individual
parts. Gather information and use it to identify the deeper issues of the problem and
validate what team think the real concern may be. Take time at this step to really
focus on the deep problem, executing this step effectively will save a lot of time
down the road.
4. Develop Actionable Steps: Create a list of realistic steps team can take to combat
the problem. The team can start with a large list and combine or subtract steps, but
it’s important team can come up with various ways to attack the problem. Use this
action plan to draw up a strategy to get at the root of the problem. Each step should
be specific and detail-focused, any steps that are vague or tedious will only take up
time and cause confusion.
5. Execute Steps: Now that the plan is in place, all team have to do is follow through
on actionable steps. Illustrate the steps, explain why team is taking them and delegate
any steps that another employee has to perform to execute plan. Communication is
key in this step.
 6. Observe and Evaluate: Monitor strategy carefully and see how it relates to the
original problem. Is it working? Is it only creating more problems? Gather data, talk
to team and be thorough and objective in evaluation. The team might have to readjust
plan as they gain new information, or may meet goals and the plan will be successful.
7. Continue Process: If the plan worked, find ways to continue integrating these steps
into team’s daily routine. If they didn’t work, go back to the goal-setting process or
identify some more aspects of the problem, there may be a deeper concern team has
missed the first time around.

Questions for Practice:

1. Define planning in the context of management and explain its significance.

2. Outline the sequential steps involved in the planning process.
3. Discuss why planning is considered a crucial function in the management process.
4. Identify and explain the essential components that make up a comprehensive planning
process.
5. Discuss some common challenges or limitations associated with the planning process.
6. Explain the concept of premises in planning and their role in decision-making.
7. Why is coordination considered crucial in the management of organizations?
8. Elaborate on why coordination is often referred to as the essence of management.
9. Identify and explain different types of coordination in the organizational context.
10. Discuss the reasons why coordination is necessary and its significance in achieving
organizational goals.
11. Explore common constraints or challenges that hinder effective coordination.
12. Provide examples of techniques or methods used to facilitate coordination in
organizations.
13. Outline the steps involved in the Management by Objectives (MBO) process.
14. Discuss the benefits and advantages of implementing the MBO approach in
organizations.
15. Identify and explain some of the limitations or challenges associated with MBO.
16. What are the key prerequisites that organizations need to consider before
implementing an MBO program?
17. Define what a Management Information System is and its role in organizational
management.
18. Identify and explain the essential components that constitute a Management
Information System.
19. Discuss various techniques employed in the decision-making process.
20. Identify and explain the key essentials that contribute to sound decision-making.
21. Explore how advancements in technology have influenced the decision-making
process.
22. Discuss different approaches to problem-solving in the context of decision-making.
23. Outline the steps involved in a systematic problem-solving process.